Final answer:
The estimated net operating income for Creswell Corporation when sales are $77,000, with a fixed monthly expense of $22,500 and a contribution margin ratio of 62%, is $25,240.
Step-by-step explanation:
To estimate the net operating income of Creswell Corporation for a month with $77,000 in sales, we will use the contribution margin ratio provided. The contribution margin ratio indicates the portion of revenue available to cover fixed expenses and contribute to profit after variable expenses have been deducted. Here's how we calculate it:
- Multiply the total sales by the contribution margin ratio to find the total contribution margin: $77,000 x 62% = $47,740.
- Subtract the fixed monthly expenses from the total contribution margin to find the net operating income: $47,740 - $22,500 = $25,240.
Therefore, the best estimate of Creswell Corporation's net operating income in a month when sales are $77,000 is $25,240.